In legal terms, domicile is the place where a person has a fixed and permanent home and to which, where the person is absent from that place, they have the intention of returning.
Domicile extends beyond the simple notion of a place of residence and signifies living in a country with the intent to remain there permanently. It denotes a permanent legal residence where one has the most significant connections, such as property ownership, voting registration, and family ties. In contrast, the concept of residence simply refers to where a person lives, either temporarily or permanently.
Every individual is assigned a 'domicile of origin' at birth, typically the father's domicile. This can change if a new domicile is established.
Under common law, domicile can be acquired in three ways:
- Domicile of origin
- Domicile of dependency
- Domicile of choice
Domicile is used by the courts to determine which legal system applies to an individual, in instances where that individual has connections with more than one jurisdiction.
Domicile for Irish tax purposes
The concept of domicile affects an individual’s liability to Irish tax, including income tax, capital gains tax and capital acquisitions tax. For example, a person who is resident in Ireland for tax purposes but is not ordinarily resident in Ireland or domiciled in Ireland is taxed only on their Irish source income and foreign income to the extent remitted (known as the remittance basis of taxation).
When filing an annual income tax return, taxpayers must disclose their residence, ordinary residence, and domicile status.
Residence and ordinary residence in Ireland
A person is considered tax resident in Ireland for tax purposes where:
- They spend 183 days (with days for this purpose including any part of a day) in one calendar year, in that year and,
- They spend 280 days over two consecutive years with at least 30 days in each year, in each of those calendar years
A person is considered ‘ordinary resident’ in Ireland for tax purposes from the start of the fourth tax year after being a tax resident for three consecutive years. Currently, if a person is resident and ‘ordinary resident’ and leaves Ireland, they will remain ‘ordinarily resident’ until they have been non-resident for three continuous tax years. During this time they are subject to Irish tax on worldwide income, except:
- Income from a trade or profession conducted entirely outside Ireland
- Income from an office or employment performed entirely outside Ireland
- Foreign income below €3,810, any amount above this is fully taxable
The domicile levy
Ireland operates a domicile levy, which applies to individuals who:
- Are domiciled in Ireland
- Own over €5 million in Irish property
- Have annual worldwide income exceeding €1 million, and
- Incur less than €200,000 in Irish income tax annually
The €200,000 levy primarily affects affluent Irish expatriates and Irish tax residents, regardless of their residence status.
The content of this article is provided for information purposes only and does not constitute legal or other advice.